Energy Payback

We hear much talk of a green new deal today, from politicians of all persuasions. It makes so much sense: a government-led reflation of ailing economies, akin to the 1930s New Deal, creating millions of new jobs. Only this time green ones, so that we can address global warming and energy security at the same time as we haul ourselves out of the downturn. Much of the infrastructure renewal will be in the energy arena, as President Obama’s inauguration speech made clear. Here the journey to a green new deal was already under way at the time the financial crisis hit us. Politicians will beworking with the grain

Fixing our dangerously fragile energy infrastructure has to start with energy demandmanagement. Here we know enormous reservoirs of efficiency exist,pumped full of carbon to be saved, simply waiting to be mined. In the mining,we know that armies of jobs can be created. British Gas recently conducted aninstructive social experiment in which they encouraged 8 typical British streets to compete with each other to cut energy bills. Advisors helped householderspick the low-hanging energy-savings fruit, which they did with ease, quicklysaving 30% on energy bills and 20% on greenhouse emissions. The Institute for Public Policy Researchrefereed the exercise. They calculated what wouldbe need ed to replicate it nationwide: 10,000 advisorjobs at an outlay of half a billion pounds. This outlay,for these 10,000 green jobs – a division in the Britishcarbon army – would save £4.6bn in the first year, andmore than that every subsequent year. That’s what Icall return on investment.

Germany has already done this kind of thing on an enviable scale. Between 2001 and 2006, in an earlier recession in the building industry, the government invested the euro equivalent of $5.2bn in retrofitting German apartments with efficient energy technologies. This investment leveraged a further $19bn of private money and created 140,000 jobs. The Government recouped $4bn of the original investment in tax paid by the new workers and unemployment benefits avoided. That’s what I call payback. (Payback even before adding the energy and carbon savings to the upside, that is.) Of course the nation needs to generate power as well as save energy. Here the good news is that renewables create more jobs per unit of power, per unit of installed capacity and per pound invested than conventional power generation. (Public transport, we should also note, similarly generates more jobs than vehicular manufacturing and use.) Every megawatt of solar photovoltaics capacity creates 7 to 11 jobs, compared to 3 for every megawatt of wind power and one to every megawatt of coal- and gas-fired generation. Out of at least 2.3m people employed in the global renewables industry as of 2006, some 794,000 were employed in the solar industry (about 624,000 in solar thermal and about 170,000 in photovoltaics, 40,000 of them in Germany). Yet the global renewables industry is minuscule compared to its potential. A global renewables mobilisation could create many millions of jobs, at a pace that would amaze most people.

A key driver of all this growth in use of renewables to date has been the feeding tariff, introduced so far by 18 European governments. In a feed-in regime, a tiny charge is levied on all bills, creating a fund from which premium rates are paid for a guaranteed period to renewables generators. The rate is reduced each year as renewables costs march ever closer to the holy grail of ‘grid parity’: electricity from renewables at the same price or cheaper than electricity from coal and gas. That holy grail is just a few years off in Germany and other countries, and has already been reached in sunnier regions. Market enablement via feed-in tariffs is only needed for a few years, whereas subsidies for nuclear energy will be needed, essentially, forever. Ahead of grid parity, Germany is now home to scouts who tour the country signing options to rent peoples’ roofs to make solar electricity, safe in the knowledge that the returns from those roofs – even when the feed-in tariff is no more – will exceed the returns from money deposited in banks. Solar roofs are called ‘pensions’ by many Germans. It is easy to see why. They are safer than a government bond, because you have a guaranteed return and a valuable asset literally on top of it.

The policies we need for accelerating the inevitable, as I think of it, in executing the green new deal, are quite straightforward. We in the UK must be much more ambitious with our energy-efficiency investments. We have measured investments in the low billions to date, and they must be made in the tens of billions. Such investments have proven early returns. They create labour-intensive industries.

We have a feed-in tariff coming for solar and other renewables as a result of our Climate Change Bill, beginning in April 2010. But why wait 16 months when it takes only a day to bail out a bank? The government’s own recent Low Carbon Buildings consultation has identified the cheapest combination for reaching the mandated energy standards in what we call Code 3 in the improvement of housing. You may not be surprised to hear that it is a combination of best-practice energy efficiency and solar photovoltaics. This pairing beats any other combination.

All this means that sometime soon, carbon armies and solar-roof scouts are coming to a street near you. And let us not forget transport. The first mass sales of plug-in hybrids begin in Japan next year. Our roofs will soon be charging our car batteries while we work, and our car batteries will be lighting our homes at night.

The green new deal attacks three of the biggest enemies now facing civilisation: foes that we ourselves have created by means of our collective foolishness. The first enemy is the credit crunch. A highway to renaissance can be paved by the jobs a green new deal would create.

The second enemy is the climate crunch. Buildings are our single biggest source of greenhouse-gas emissions. More than half our national emissions come directly and indirectly from the built environment. National mobilization of a carbon army, and a cleantech industry, can cut these emissions to zero and even beyond, should we choose to deploy enough microgeneration to turn buildings into net generators.

The third and final crunch is the imminent global energy crisis. Growing numbers of energy experts now warn that the energy industry is being as overoptimistic about its asset base as we now know the banking industry was. Even if people reject fears about peak oil, they must surely worry about the security of our energy supplies on the basis, for example, of the the recent gas pantomime in Ukraine. The green new deal offers us real hope of disconnecting political game-players from the ends of our pipelines and our tanker routes.

The Prime Minister likes to talk, in our current collective national circumstances, of the wartime spirit. He is right in more ways than one. We have the people to mobilise with. We have the technologies to mobilise with. We have the power to innovate further as we mobilise. If we do this, we can fashion a great big silver lining in the clouds that are gathering so rapidly around us.